Creating a Local Currency: The Example of Salt Spring Island, Vancouver

    Salt Spring Island, off Vancouver, has a population of 10,000. On the 15 September 2001, Salt Spring Island Dollars were launched at the Island’s largest annual gathering, the Farmers Institute’s Fall Fair. They are the brainchild of the Sustainable Salt Spring Island Coalition which, in the fall of 2000, had been looking at ways to establish a local currency which would avoid the problems of the “alternative” currencies, such as Toronto Dollars, LETS and Hours systems.

    They discovered the main problem was that none of the present alternative currencies were 100% redeemable into their national currency, and so many people were unwilling to use them if they couldn’t “pay the bills.”

    However, the Salt Spring Island Coalition reckoned that if the currency could generate a profit then it could go into circulation through a one-to-one exchange with the Canadian dollar. It could be backed 100% by the national currency. To their knowledge this had never been achieved by any local currency, anywhere in the world.

    Essentially, it works this way: The notes come into circulation through the local credit union which exchanges Canadian dollars ($) for Salt Spring dollars ($$).

    The Canadian dollars are then placed into a Reserve Fund run by the Salt Spring Island Monetary Foundation (SS IMF), where the amount gathers interest in the conventional way.

    Since they’re fully backed by Canadian dollars, then local traders are quite happy to take the Salt Spring dollars.

    The more Salt Spring Islanders use their Salt Spring dollars then the more funds for the Community is raised; in two ways.

    Firstly, because $$’s come into circulation through the exchange of Canadian dollars — which stay in a Reserve Fund and collect interest — then the more $$’s which stay circulating, the more interest will continue to accumulate in the Reserve Fund.

    Secondly, the currency has a two-year expiry date. Up to, and including, the expiry date, $$’s may be redeemed for either Canadian dollars or for new issues of $$’s. Any currency that has not been redeemed for Canadian dollars by the expiry date — for example, any notes which have left the island, or have been lost — are classified as ‘out of circulation’ and lose their face value, even though they retain their collector’s value.

    As Salt Spring Dollars are removed from circulation, so their equivalent value in Canadian dollars remains in the Reserve Fund and is, effectively, a profit.

    An accounting process takes place regularly to determine how much of the SS IMF Reserve Fund is available for disbursement back into the community.

    The aim of the currency is to promote local spending and provide a revenue resource for community projects.

    What would be needed to do something like this, say, in a county, a region, or a city, in Britain? It would need Local Authority backing. Indeed, it would probably require the Local Authority to initiate the project. It would need the support of the local Chamber of Commerce, the local media, and the regional Tourist Board, among others. It would need a group of people who had the commitment, and the funding to devote the time. It would need artists and expertise, accountants and book-keepers. It would need liaison between local currency representatives and local credit unions and banks in the area. It would need anti-counterfeiting expertise. Would it even be allowed?

    In the following text, edited with permission from their website a double dollar $$ sign indicates a Salt Spring dollar.

    Eric Booth writes:

    Up until recently, there have been virtually only two currencies accepted in Canada, the Canadian Dollar and the US Dollar. American tourists can usually convert their $US into Canadian at the going exchange rate, at either merchants or banks.

    Both currencies really have no “loyalty” to where they are used. The cash flows in and out of communities and has no lasting benefit. At the same time, rural communities across Canada have suffered from drops in local spending due to the lure of lower prices in larger communities and, more recently, the internet. Moreover, big stores, like WalMart, have all resulted in lower levels of local spending in smaller communities.

    To offset this phenomenon, over the years, there have been a number of alternative forms of local currency proposed in Canada. The LETS System, Ithaca Hours Systems, and the Toronto Dollar projects are perhaps the best known of these local currencies.


    These have been in circulation for the past three years. People living in, or visiting, Toronto can exchange Canadian dollars for TDs, on par, one for one. There are currently over 250 merchants in Toronto who accept TDs.

    If merchants wish to redeem the TDs, they have taken in, for Canadian dollars, they receive 90% of the face value. The other 10% goes to the charitable organization that runs the TD program. Therefore, merchants are urged to re-circulate the TDs rather than cashing them in, to avoid being subject to the 10% discount.

    In our discussions with local merchants, many felt they could not support a 10% discount, at a time when they are operating on extremely tight margins and may not want to, or cannot afford to, discount their merchandise on an ongoing basis.

    When the Salt Spring Dollar Program was in development, we noted that while the TD program did promote local shopping, the question of merchant acceptance, due to an ongoing 10% discount, was a serious factor to be dealt with. Compare the 10% discount to the 2-3% merchants pay on VISA or Mastercard purchases.

    To overcome this “acceptance problem”, we spent months developing and planning to create a unique new model for alternative local currency. The success of that planning is now evident in the results.

    Acceptance level by the business community, of our new rural currency, after only two months, on an island of only 10,000 permanent residents, is over 95% and still growing.

    Compare the number of businesses accepting Salt Spring Dollars after only two months — 120+, with those accepting Toronto Dollars after three years — 250+. And, we now estimate that close to 100% of merchants will soon be accepting them.


    A mixture of strategic development and implementation, unique design, long-term business planning, and, perhaps most importantly, by making the Salt Spring Dollar the first, alternative currency in Canada that is backed 100%, by the Canadian dollar.

    Prior to launch, we garnered the support of all major businesses, the local Chamber of Commerce, the local credit union, two major banks (Bank of Montreal and the CIBC) and even the Canada Post service.


    Merchants accepting Salt Spring dollars benefit in a number of ways over current methods of payment:

    – Salt Spring dollars promote local shopping.

    – Coinage charges at banks are reduced due to the use of $$1’s and $$2’s.

    – Mastercard/VISA/Debit card charges to merchants are eliminated. This can amount to an additional 1-3% income.

    – Merchants show community support by accepting Salt Spring Dollars.

    – If a local Municipality is participating in the Salt Spring Dollar Project, and makes use of funds from the Reserve Fund account, merchants will benefit in reduced property taxes.

    – As more funds are generated through the Salt Spring Dollar Project for community projects, fewer requests for donations from the community are likely to be made on business owners


    To make the Salt Spring Dollar Project a success, we incorporated a number of key elements:

    – Limited editions of bills — currently a maximum 20,000 per issue.

    – Well known Salt Spring Island artists’ work.

    – Impressive design and graphic elements.

    – State of the art, anti-counterfeiting measures.

    – Exact dimensions of Canadian dollars, allowing for use in counting machines and Automatic Teller Machines (ATMs).

    – Expiry dates.

    – Revenue generation.

    – 100% backed by Canadian dollar Reserve Fund.

    – Accepted on par, with no service charges, at local banks and credit unions.

    Merchants can offer higher exchange rates for the $$’s, instead of having discount sales — for example by treating Salt Spring dollars as $1.10 Canadian dollars when goods are purchased — thereby promoting local spending and use of $$’s by tourists and locals.


    Salt Spring Dollars go into circulation via the local credit union. Merchants, or members of the community, exchange Canadian dollars for Salt Spring dollars in amounts of $$50. A number of merchants, using $$’s as part of their daily cash float, offer to supply Salt Spring dollars in smaller amounts.

    The Canadian dollars are placed into a Reserve Fund account, held by the Salt Spring Island Monetary Foundation (SS IMF) a registered, not-for-profit society.

    Within the next few months, ATM machines will also be used to dispense $$20s.

    Merchants deposit Salt Spring dollars along with their Canadian dollars, and the participating financial institutions convert the Salt Spring dollars, on par, into Canadian dollars in their account by debiting the SS IMF’s Reserve Fund account.


    Each bill has an issue date, and an expiry date — usually 2 years after issue. At anytime during the two-year period prior to their expiry, the bills can be used at participating merchants and/or exchanged for Canadian dollars at participating banks and credit unions.


    Featuring the work of Salt Spring Island artists on the back of the bills, Salt Spring dollars are issued in limited editions of either 5,000 ($$100’s), 5,000 ($$50’s), 10,000 ($$10’s and $$20’s) or 20,000 ($$1, $$2 and $$5).

    When there is demand for more $$’s in circulation, a new issue is printed with different artwork.

    The impeccable quality, brilliant design, security measures and limited edition aspects of Salt Spring Dollars make them instant collectors items for currency collectors, tourists and locals alike.

    The “collectability” factor, combined with the expiry dates has created a formula for exciting revenue generation.


    Say $50,000 has accumulated in the local Reserve Fund account. On a day-to-day basis, only $5,000 of the Reserve Fund account is actually used for the exchange of $$’s back into Canadian dollars.

    The balance of $45,000 is made available to the Municipality by the Salt Spring IMF on an interest-free line of credit, guaranteed by the Municipality.

    The more monies placed in the local Reserve Fund account by the community, the lower taxes will be necessary to cover any conventional lines of credit.

    Revenue Potential

    Say your community has 100,000 tourists visit each year. If, on average, they left with just $$1 in their pocket, $100,000 Canadian dollars would accumulate in the Reserve Fund each year.

    After two years, there would be $200,000 Canadian dollars. Say 10% of the Salt Spring dollars were redeemed during that period. That leaves $180,000 Canadian dollars in the local reserve fund.

    At that point, the SS IMF will issue $$180,000 new Salt Spring dollars.

    50% of those Salt Spring dollars are given to the Participating Municipality or community to use for community projects, and 50% is directed back to the SS IMF.

    Any accrued interest on the Reserve Fund account is also directed to the Participating Municipality or community.

    The Reserve Fund is left to increase the following year, by another $100,000, and so on. This allows the Municipality to eventually operate interest-free, while providing a source of ongoing revenue that can be used within the community.

    Plus, there is the potentially thousands of dollars extra in local merchants pockets due to reduced transaction fees and increased local shopping.

    MUNICIPAL/COMMUNITY ADVANTAGES include lower taxes, revenue generation and interest-free credit lines.

    For annual operations, virtually every Municipality in Canada must either issue Municipal or Community Bonds or carry a line of credit at a bank.

    The interest rates required to be paid on such bonds or lines can range from approximately 2-7%. This results in higher taxes within the community to cover the interest charges. Therefore, for each $100,000 in the reserve fund, there is a potential saving to the community of $2-7,000 per year.

    Participating Municipalities in the Salt Spring Dollar Project can make use of the local Reserve Fund account by guarantee, and therefore bypass interest charges.

    For example, compare the use of Community Bonds to Salt Spring Dollars. With a $100 Community Bond, the purchaser — who could be a corporation, a member of the community or someone not even in the community — collects the interest on the bond, but cannot use the $100 for a period of time — say two years.

    However, if the person takes that same $100, but exchanges it directly into Salt Spring Dollars instead of buying a Community Bond, then the Municipality will benefit in the following ways:

    – 50% of any of the $$100 that goes out of circulation prior to the expiry date — which represents profit — is made available to the community for worthwhile projects;

    – The Municipality saves the interest it would normally pay on the bond, and the community pays proportionally less in tax;

    – The Municipality collects any interest on the portion of the $100 in the local SS IMF’s Reserve Fund which is not used;

    – The exchanger, gets to use the $$100 in circulation within their community, and any other participating community.

    Thus, simply by exchanging some Canadian dollars into Salt Spring Dollars, the community benefits in a number of ways.

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